Farmers and their groves: How efficient are farms with forested land

This study examines the performance of the forested land ownership by farmers in Poland this paper compares the efficiency of farms reporting a portion of their operated land as a forest with those that do not own any forested land. Using FADN data, the study focuses first on cost efficiency, which was estimated using the fixed effects stochastic cost frontier model (Kumbakhar and Knox Lovell, 2003). A generalized multiproduct translog cost function (Caves, Christensen, and Tretheway, 1980) was selected to represent the deterministic part of the cost function because it imposes fewer a-priori restrictions than other functional forms commonly used for the task. The efficiency scores (i.e., the fixed effects) were subject to further analysis, to establish the differences between farms with and without forest land (where forest land was measured as the proportion of the total farm area that was under forest land). The results strongly indicated, both in aggregate and considering estimates by farm type, that most of the farms with forest land were relatively less efficient than farms without them. Because the average farm size has been steadily increasing (although it remains relatively small) in response to a decreasing farm numbers in Poland, while the commercial agricultural production contracts in some peripheral areas without creating a shortage of food or agricultural commodities, there is an opportunity to reallocate land from its current uses to reforestation on farms already managing small groves. The speed of reallocating land will, however, depend greatly on ability of forested land to generate a stream of income. Given the FADN data, the transfer of all remaining agricultural land operated by farms with forested acreage to reforestation would add about 170 thousand hectares of privately owned forests in Poland. Additionally, the transition of farms owing woodlands may lead to their new role in the national environmental policy and efforts to cut the greenhouse gas emissions.